A Dangerous Precedent

My colleague at Ethanol Producer Magazine, Holly Jessen, wrote a story this morning that I post below, about the latest attempt to repeal the 45-cent volumetric ethanol excise tax credit. The credit isn’t set to expire until the end of this year, but a growing force in Congress is pushing for its early elimination.

The measure (detailed below) would, however, extend the $1.01 cellulosic credit and include algae in the pool of eligibility. Interestingly enough, at the same time, there are other bills in Congress looking to extend the biodiesel and renewable diesel credits for three years, the $1 per gallon credit is set to expire at the end of this year.

What sort of precedent would it set for the renewable fuels industries, and maybe more importantly to the investment community, if tax credits are passed, millions or billions of dollars are invested because of perceived long-term political support, only to have those assurances repealed?

If Congress chooses not to renew renewable fuels tax credits, that is one thing. To repeal them early, is another.

The newest evolution in ethanol tax credit reform efforts is a compromise between three senators that would end the Volumetric Ethanol Excise Tax Credit and tariff as of July 31 while extending other ethanol-related tax credits, such as the Cellulosic Biofuel Production Tax Credit, for a limited time. Sens. Dianne Feinstein, D-Calif., John Thune, R-S.D., and Amy Klobuchar, D-Minn., sent a letter July 7 announcing the bipartisan agreement to Senate Majority Leader Harry Reid and asking that it now be considered by the full U.S. Senate.

“The compromise invests $668 million in these tax credit extensions, fully offset, while providing $1.33 billion in deficit reduction,” the letter said. “If Congress fails to enact this proposal before it adjourns for August recess, the substantial levels of deficit reduction and investment achieved by this compromise will no longer be possible, and we cannot commit our support after that point. Therefore, we ask for your assistance in moving this agreement through Congress before we adjourn.”

- Expiration Dec. 31, 2015. - Capped at 50 million gallons in 2013, 100 million gallons in 2014 and 155 million gallons in 2015. Unused gallons would roll into the next year. -The tax credit would include depreciation allowance for cellulosic plants and expand the definition of cellulosic biofuel to include fuels from algae.

Alternative Fueling Infrastructure Tax Credit

- Expiration Dec. 31, 2014. - The tax credit would be modified as proposed in Senate bill 1185, which provides a tax credit to fuels including E85, at least E15, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas or hydrogen. It also allows the entire cost of dual-use blender pump to qualify for the credit rather than the incremental cost. - Reduction of the Investment Tax Credit from 30 percent to 20 percent as of Jan. 1, 2012. - It would cover technology neutral investments in blender pumps, electricity charging stations or natural gas fueling stations. The Joint Committee on Taxation estimated that about half the qualifying investments would be in ethanol infrastructure.